When oil prices are high, Americans like to say that the oil markets are broken, driven by speculators, detached from reality, driven by conspiracy. When prices are low, we do not have complaints about the oil markets. Then we say the “markets are working” as they are supposed to. In our minds the “real” price of oil is whatever we consider cheap.

We can't control the price of oil anymore. What we have to do is control how much we spend on the stuff.

But there is no “real” cost for a barrel of oil -- it’s a number arrived at in markets, between producers, consumers and a host of middlemen and speculators. (More on them in a second.)

From the producers' side, we have some sense of the financial cost of finding and pumping a barrel of oil (though the political and environmental costs go far beyond this).

Last week the Energy Information Administration reported that the worldwide cost of finding and lifting the equivalent of a barrel of oil out of the ground is about $30. There is tremendous variation from place to place: finding that barrel costs about $7 in the Middle East and more than $41 in the Gulf of Mexico. All of it, though, sells at the same market price as its grade allows. In other words, if the market sets a price of $92 for oil grade X, everyone who produces X grade oil gets roughly $92, whether it costs them $11 or $88 to get it out of the ground.

Prices, obviously, are set in the markets, including the New York Mercantile Exchange. Though the world trades about 85 million barrels of oil a day, the guys (they’re mostly guys) down at the Nymex spend a lot of time staring up at news reports indicating that a few of those barrels might not make it to market. When there’s a storm in the Persian Gulf, or a pipeline explosion in Iraq, the price of every barrel in the futures market moves higher.

When a whole million barrels of highly desirable Libyan light sweet crude disappears overnight, the price spikes. The entire market becomes jittery -- because just a few weeks ago they would have all said that Libya was totally safe. Now everyone’s wondering which country might be next. Put bluntly, the inertia of the citizens of Middle Eastern countries can no longer be taken for granted. (Americans might ask ourselves whether we have been enjoying cheap gas all these years at their expense.)

But what about the speculators and the gougers? Yeah. There are lots of speculators, and the market has become more speculative recently. Tom Kloza, who writes a wonderful blog on oil prices at the Oil Price Information Service, cites a report from the Commodity Futures Trading Commission, released last week, showing that an inordinate number of traders who are not suppliers or refiners are holding “long” positions -- expecting the price to go up. When the NYMEX was founded, nearly all trades were done by people. Now many of them are done by computers responding to algorithms only they can see. All of this makes the market behave differently. It transmits prices and information much faster than it ever did. But is it broken?

The trading is done by computers responding to algorithms. But does it mean the market is broken?

One thing that is broken about the market is the American consumer. We’re broke in the sense that we’re paying well over a billion dollars a day for gasoline right now. And as market players we’re broken because we have no alternative but to keep buying gasoline no matter what the price. I’m working on a project called The Energy Trap to try to more accurately track the cost of commuting for the middle class. Last week I interviewed a man in Maine, who, with his wife, works three jobs. One of their jobs basically pays for their transportation to the other two. He told me he has no choice.

This is a real erosion of the American Dream: who can think about a future when they have so little ability to choose how they spend money? And so little potential to get ahead? At $3.50 a gallon, Americans will spend $41 billion on gasoline in the month of March (Kloza, again) -- a huge hemorrhage of money that could be spent on anything from bridges and health care to daffodil bulbs or karate lessons.

There is no way for America to control the oil price anymore. What we have to do is control how much we spend on the stuff. And the only way to break our oil dependence is to have both a long-term plan to reduce the role of oil in our economy and a short-term plan to get people to work with less oil. That short-term plan needs to include incentives for carpools and van pools, private transportation networks like jitneys, telecommuting and general transit innovation. Americans need to be able to choose not to pay high oil prices, and not to depend on the likes of Qaddafi to supply us with cheap oil.